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The Effects of Subsidizing Social Security Contributions : Job creation or Informality Reduction ?

Author

Listed:
  • Aşık,Güneş
  • Bossavie,Laurent Loic Yves
  • Kluve,Jochen
  • Nas Ozen,Selin Efsan
  • Nebiler,Metin
  • Oviedo Silva,Ana Maria

Abstract

This paper evaluates the impact of an employment subsidy scheme covering employers’ socialcontribution costs on registered employment in small firms in Turkey. It utilizes a rich, firm-level administrativedata set with monthly frequency, which allows for closely following the dynamics of registered employment in firmsbefore and after the implementation of the subsidy. The empirical approach utilizes the geographically targetedimplementation of the subsidy to estimate its effects using a difference-in-difference specification. The paper findsthat the subsidy scheme had a sizable and positive impact on registered employment in small firms. The results are robustacross specifications and to the choice of the control group. Positive effects on formal employment are also fairlyconstant and sustained over time. Corroborative evidence suggests that the positive effects on registered employmentare mainly driven by the formalization of existing workers as opposed to new job creation. Therefore, the resultsindicate that social security contribution subsidies in small firms can be effective in reducing informality incontexts where informal employment remains common.

Suggested Citation

  • Aşık,Güneş & Bossavie,Laurent Loic Yves & Kluve,Jochen & Nas Ozen,Selin Efsan & Nebiler,Metin & Oviedo Silva,Ana Maria, 2022. "The Effects of Subsidizing Social Security Contributions : Job creation or Informality Reduction ?," Policy Research Working Paper Series 9904, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9904
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    References listed on IDEAS

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    Keywords

    Employment and Unemployment; Labor Markets; Rural Labor Markets; Labor Policies;
    All these keywords.

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